Save for your baby’s future

Alisha Shinde
Tuesday, 12 May 2020

The pandemic has taught us some valuable lessons, most importantly the need to invest in our health and build up on our savings. We talk to an expert to know how parents can start saving for their newborn

Indians do have the habit of saving and the lessons start early on. Give kids pocket money and a part of the funds is likely to find its way to the piggy bank. If not a fancy piggy bank, then a humble jar or an used mom’s purse or a discarded pencil bag or something like that. Many a time, if the dad / mom has a family conversation on lack of funds and unable to buy something, the kid quickly chirps, ‘I have some money. You can buy it.’ Innocent talks, but it’s good to start this habit early.  

Savings have acquired a newfound importance after the outbreak of the pandemic and the subsequent lockdown. Everyone needs to save including parents for their newborn’s future and education. Rachit Chawla, CEO, Finway, tells young parents how to begin.

He starts by explaining that the best way to go about saving for a child is through SIPs. “Every month, you should deposit some amount towards your child’s savings; you can choose from a range of options to do so. Debt instruments as well as equity instruments are available for the same,” says Chawla.

He further explains that for children, generally the tenure is very high, so equity is also kind of risk free – provided you don’t look at the money for the next 10 to 15 years since equity generally derives fast superior returns. There are plenty of funds which are absolutely working online, and they deduct the money from your account month-by-month – all you have to do is set up the transaction only once.

Building the funds

Firstly, Chawla says that one should decide the kind of instrument that they want to invest in. There are largely three instruments — the first one is Equity, which is linked to the market; the second is Debt that involves a slight risk, but the returns are higher than liquid; and the third is Liquid which is absolutely risk-free but the returns are minimum.
“In Equity, you get the highest returns, but the risk factor is also higher. Once you shortlist equity or debt or liquid, then the second step is for you to identify the institution which has a good brand name and enough liquidity since this will ensure that after you’ve invested for a certain time, the institution you’ve chosen is healthy, sound and available to give you the money as and when you want to withdraw it,” says Chawla.
For instance, if you’re going for big companies like HDFC, Kotak, or UTI, then you need to see what kind of charges they levy on taking care of your funds. Therefore, you should take into consideration all these points — liquidity, charges, entry and exit loads, and past performance — before arriving at a decision. All the data that you would require, is available online, and by studying the facts, you can make an informed decision.

Multiply through mutual funds

However, considering the fact that there are many players in the market that have provisions and policies primarily available for children, Chalwa explains that one shouldn’t be mixing insurance and investing, because insurance is way different from investing.
“If I have to invest, I would not look at insurance companies, I will only look at the companies that deal in investments and take care of the money — which is actually mutual funds. However, if I want to protect myself or my car or my assets from any threat, then I would go for insurance. However, people often end up clubbing both,” says Chawla, adding that they want insurance benefits as well as saving benefits.
As soon as you club the two, the value gets lost, which is why you should avoid doing it. You should go for insurance if you’re looking to safeguard your assets, but if your goal is to multiply your money, always use the mutual fund route.

Buy the gold

In India, people buy gold to secure their child’s future. Chawla says that this could prove beneficial since gold is a worldwide recognised asset class. “Investing in gold is definitely a good option because gold is linked to some extent with the dollar as well and therefore, it will definitely give you benefits of the inflation and devaluation of the currency,” he says.
The finance expert also says that gold is a good asset class and for a longer period of time, it shall give you good returns. He also points out that nowadays, you don’t even have to buy physical gold. There is sovereign gold provided by the Government of India, and you can start investing in that as well.
Measures every parent must take

  • 1. Make sure SIP is not broken. As soon as SIP starts to break, you will never be able to accumulate a bigger compensation. So, your SIP has to continue. Make sure you are able to put it month-on-month.
  • 2. Always start with a smaller SIP so that there is no chance of not getting it through or missing it in between. You have to remember that the value gets lost if you miss out on SIPs.
  • 3. Whenever you have excess liquidity and you don’t know what to do, try to invest in the similar SIP on a lump sum basis. So at the end of the day, your money starts to accrue and grow.

Sakal Money
To know more about how you can plan your savings for your baby, log on to

Related News

​ ​